Thanks to the ubiquity of e-mail and software for seemingly every aspect of work, more business records are digital. But experts say most companies don't have adequate systems for managing them.

When it comes to storing electronic business records, most companies do a less than adequate job, and that’s putting it mildly, experts say.

Blame it on not caring or spending enough, or on technology for electronic records management not being good enough. Either way, “most implementations are failures,” says Tod Debie, a one-time product manager for a major electronic records management vendor.

Debie’s is an extreme view. But industry analysts and other experts agree that a majority of companies, from Fortune 1,000 enterprises to small businesses, don’t have the electronic records management systems or policies they need.

And they do need them.

E-mail has become an important source of business records, and companies are drowning in it, contributing to an estimated 210 billion messages sent every day worldwide, according to Radicati Group, a Palo Alto, California, technology market researcher. Radicati predicts that this year, workers will spend 41 percent of their day handling e-mail.

E-mail gets the spotlight, but electronic business records include any documents that companies need to keep for legal, regulatory or continuity purposes, such as personnel files, contracts and the like.

Electronic records management systems can make it easier for companies to comply with “e-discovery” rule changes that took effect in 2006, making e-mail and other digital data subject to disclosure in federal lawsuits. The systems can also assist companies in health care, insurance, pharmaceuticals, finance and other industries that are required to retain business records for a set time.

Experts say electronic records management systems could help companies deal with the lawsuits and new regulations they predict will arise from finance, real estate and mortgage industry indiscretions that contributed to causing the current global recession.

What’s coming down the regulatory pipeline from Washington is going to increase regulation over content management, and that could push adoption of electronic records management “for decades to come for settling what’s happened over these last quarters,” says Sean Hegarty, a senior product manager at Iron Mountain Digital, an electronic records management vendor.

The past few years have ushered in lower-cost Web-based systems and other technological improvements. But for all the changes, many companies still print out documents such as work orders, personnel files and e-mail, and store them in paper form. Or they use stand-alone electronic records management systems in different departments or divisions.

Companies are still struggling with how to deal with records that are “born digital,” says Brian Babineau, senior analyst with Boston-based Enterprise Strategy Group, an information management research firm. “They don’t know what exists, where it exists, how many copies exist—and that creates a problem when they try to figure out how to keep it.”

Companies that have switched to comprehensive, enterprise-wide electronic records management systems have reduced IT and labor costs, but they’re still in the minority, Babineau says. If and when companies adopt enterprise systems, IT, legal or compliance departments are most likely to lead the way.

But HR managers should be involved in the planning and policymaking process, experts say, not only because employee files are some of those vital business records, but also because the HR department can assist with employee training.

From many to oneAdopting a comprehensive electronic records management system isn’t a quick fix or a cheap one.

Some systems can take years to get up and running, and depending on how many records companies need to preserve, their costs can rise into the millions of dollars. If done correctly, however, the outcome can simplify storing and retrieving business records and benefit the bottom line.

That’s what Larry Hawkins found out when he helped upgrade electronic records management systems at FirstEnergy, a $13.6 billion power company with 4.5 million customers in Ohio, Pennsylvania, Illinois and New Jersey.

In 2005, Hawkins led a FirstEnergy compliance department staff of 29 that replaced six outdated record-keeping systems in two FirstEnergy business units with one comprehensive electronic records management process.

It was a hard sell.

Even though legacy systems were old, the various departments didn’t think one system could meet their particular needs, says Hawkins, the company’s records and information compliance director. A detailed process analysis convinced them otherwise, and once everyone was on board, Hawkins’ team went to work.

The team replaced outmoded systems that consisted of multiple stand-alone databases. These systems created indexes of records stored on paper or microfilm with electronic records management hardware and software from IBM’s FileNet division that cost close to $1 million.

With the new system, paper records were scanned into electronic files where they could be indexed, retrieved and, when the time came, destroyed, while leaving a record of what the purged file had contained. Departments used the system to create a common scheme for determining how long a record needs to be saved for regulatory, legal or other business purposes.

The system reduced by approximately 25 percent the manpower FirstEnergy needed to process the 1.5 million paper records the company’s two business units produce each year, Hawkins says. More recently, FirstEnergy added an e-mail archiving system that indexes and stores the 2 to 3 percent of the 2 million daily e-mails employees send that are deemed business records.

In upcoming months, Hawkins’ compliance department team will roll out electronic records management to FirstEnergy’s corporate services departments, including HR.

“It’s a big job getting everyone into the process” and likely will take several more years to complete, he says.

Hawkins’ team handled employee training. But other companies use a combination of compliance, IT and HR staff for employee training.

“It’s really a business process improvement discussion,” covering what’s going on and how you can do it better,” says Babineau, the Enterprise Strategy Group analyst.

Although FirstEnergy opted to use on-site technology, electronic records management vendors and industry analysts say they’re seeing an uptick in interest in software-as-a-service products from vendors such as Iron Mountain Digital, Autonomy, Microsoft, Google and a host of smaller vendors that save companies the hassle of maintaining their own hardware and software.

Because Web-based systems can be less expensive, cash-strapped IT departments that wouldn’t have considered them six months ago are now looking at them, says Hegarty, the Iron Mountain Digital product manager. One client, a U.S.-based global logistics company with more than 100,000 employees, went from wanting an electronic records management site to being a software-as-a-service evangelist over just two quarters. The savings changed the thinking of company officials.

“It’s the beginning of a turnaround, but it’s still the beginning,” Hegarty says.

The recession could end up pushing more companies overall to adopt electronic records management, says Bob Larrivee, director of education services for the Association for Information and Image Management, a records management industry trade group.

“I’m psyched about it,” he says. “It’s going to be a very interesting couple years.”